Waxman-Markey worse than useless?

In a very depressing piece of analysis, Grist columnist Gar Lipow argues that the Waxman Markey climate change bill emerging in the US will do worse than nothing, when it comes to dealing with greenhouse gas emissions. This is because of how it issues permits (downstream, rather than upstream), its problematic use of offsets, and the fact that most permits (80%) will be given away, rather than auctioned.

Lipow concludes that: “Because of the flaws I’ve mentioned, it essentially requires no emission reduction in practice for at least a decade. Any short term benefits come from non cap-and-trade provisions, such as the Renewable Energy Standard.”

Muddled climate policies that get captured by industry are a major danger, throughout the developed world. Unless you get the details right, it is easy for carbon pricing policies to give a huge amount of money to the dirtiest polluters, increase consumer prices, and fail to effectively mitigate emissions. While it is urgent to begin mitigation, it is also necessary to note the trade-off between a quick and deeply flawed approach and a slower but less problematic one. To begin with, we need policies like the Vienna Convention on Substances that Deplete the Ozone Layer: too weak, but not hopelessly flawed. Additional political and scientific work turned that instrument into the relatively effective Montreal Protocol. If we don’t display wisdom and overcome entrenched interests in drafting climate policies, we risk blocking the chances of any such progression in climate legislation.

The Waxman-Markey climate and energy bill, now moving through the House, is polarizing the environmental community. Longtime climate crusader Al Gore says we should do all we can to get the legislation passed; top climate scientist James Hansen says we should demand a different, better bill. Activists and environmental groups are picking sides or staking out positions in the middle.

May 21st 2009
From The Economist print edition
Compromise has enfeebled America’s cap-and-trade bill. A carbon tax would be better

FOR those who believe that climate change is a serious problem, the decisions that America makes now are of momentous importance. In Copenhagen in December, the world will decide whether to reinvigorate or abandon its effort to avert serious climate change, and what America does between now and then will in large part determine the outcome. So the fact that Barack Obama clearly intends to turn America from being a laggard into a leader in this task is therefore encouraging.

Good intentions, however, are not enough. Moves in Washington over the past week have indicated the shape of America’s policy. And although impressively far-sighted by the standards of the Bush era, it looks disappointing when measured alongside what is probably needed to insure against the real-though-hard-to-quantify threat of serious climate change.

America and climate changeCap and trade, with handouts and loopholes
May 21st 2009 | WASHINGTON, DC
From The Economist print edition
The first climate-change bill with a chance of passing is weaker and worse than expected

So Mr Obama proposed something very similar to a carbon tax, albeit slightly more cumbersome. Industries that emit carbon dioxide would have to buy permits to do so. A fixed number of permits would be auctioned each year. The permits would be tradable, so firms that found ways to emit less than they were entitled to could sell some of their permits to others. The system would motivate everyone to reduce emissions in the most cost-effective way. It would raise energy prices, which is the point, but it would also raise hundreds of billions of dollars, most of which Mr Obama planned to give back to voters. Alas, that plan looks doomed.

On May 15th Henry Waxman and Edward Markey, the Democratic point-men on climate change in the House of Representatives, unveiled a bill that would give away 85% of carbon permits for nothing, with only 15% being auctioned. The bill’s supporters say this colossal compromise was necessary to win the support of firms that generate dirty energy or use a lot of it, and to satisfy congressmen from states that mine coal or roll steel.

Giving away permits creates several problems. First, it generates no money, thereby royally messing up Mr Obama’s budget. Second, it means that the permits go not to those who value them most (as in an auction) but to those whom the government favours. Under Waxman-Markey, electricity-distributors would get the largest share, with the rest divided between energy-intensive manufacturers, carmakers, natural-gas distributors, states with renewable-energy programmes and so on. Oil firms, with only 2% of the permits, feel hard done by. But most polluters, having just been promised hundreds of billions of dollars’ worth of permits for nothing, are elated. So it is not just the owners of ski resorts and businesses with negligible carbon footprints that are queuing up to praise the bill. Duke Energy, a power generator with lots of coal-fired plants, is also enthusiastic.

Here we examine one of the other major provisions of the ACES bill, the national renewable electricity standard (RES) established by Title I of the bill. Unfortunately, our analysis concludes that the RES has been severely weakened since initially proposed in the discussion draft version of the ACES bill; as it now stands, the RES may barely increase U.S. renewable electricity generation compared to business as usual projections.

One of the least discussed flaws in the Waxman-Markey bill’s attempt to tackle the climate crisis also illustrates the fundamental problem with cap-and-trade. The bill strips the EPA of much of its existing authority to regulate greenhouse gases, in return for the new, weaker authority granted under Waxman-Markey. The existence of this authority is one of the strongest levers that can be used to push through new climate legislation, and it should not be given up in return for something this weak. Under recent Supreme Court rulings, existing EPA is authority is quite strong, albeit required to be implemented in less than optimum ways. The offset provisions, along with reduced targets during the first ten years, guarantee this bill will produce few or no emission reductions if passed. In the name of not letting the perfect become the enemy of the good, Waxman-Markey lets the perfect become the enemy of the good. It trades actual emissions reductions for acceptance that cap-and-trade is the right means of reducing emissions.

As the struggle to pass the Waxman-Markey climate-energy bill showed, there is a certain price any political system is willing to bear for climate action. In China, that price is low. In the United States, it is medium. And in Europe, it is relatively high.

But in every system, there exist two primary ways to reduce the costs of climate legislation to align it with that politically-determined price. One is by weakening the pollution reduction targets – something which provides zero benefit to the climate. The other is by including offsets – making it possible for emitters to get credit for low-cost pollution reduction activities like tropical forest conservation and energy efficiency investments.

“Al Gore says support it. Paul Krugman says support it. Two Nobel Prize Winners. Who am I to question them?”

That is a question received, in more than one space, when it comes to the Waxman-Markey American Clean Energy and Security (ACES) Act.

Well, with all due respect to the infallibility of a Nobel Prize Winner (Kissinger, ‘73, James Watson, ‘03, etc.), we should be clear that the bill, as drafted, falls far short of what is necessary and quite likely falls short of what is possible.

The energy efficiency provisions in the House energy and climate bill (H.R. 2454) could save $750 per household by 2020 and $3,900 per household by 2030, according to an analysis by the American Council for an Energy-Efficient Economy (ACEEE). An ACEEE news release notes that not only will efficiency reduce the costs to consumers and businesses of cutting carbon pollution

House Democrats resolved the last major sticking points between farm state members and sponsors of the comprehensive global warming and energy bill last night, clearing the way for a historic floor vote as early as Friday.

“We have an agreement finally after all these days,” Agriculture Chairman Collin Peterson (D-Minn.) told reporters. “We have something that I think works for agriculture. We still have a couple little areas that may get resolved down the line. But we’ve come to an agreement.”

Peterson said that he planned to vote for the House climate bill — and bring dozens of rural lawmakers with him — after Energy and Commerce Chairman Henry Waxman (D-Calif.) agreed to make several concessions on issues that had drawn the ire of farm state members.

Waxman and Peterson signed off on a plan that puts the Agriculture Department — rather than U.S. EPA — in the lead for management of the offset program that pays farmers and other landowners to conduct environmentally friendly projects.

–The Agriculture Department would oversee projects by farmers and ranchers to lock carbon into the soil by reduced tillage or planting trees. USDA is more popular in farm country than the Environmental Protection Agency, which runs most pollution control programs. Work dating from 2001 would be eligible for credit for carbon reduction, said Peterson. Inclusion of “early adopters” will broaden the appeal of the bill, said an agricultural lobbyist.

–A proposed EPA regulation, which would make U.S. ethanol makers responsible for greenhouse gas emissions from conversion of forests and grasslands overseas to cropland, would be sidetracked for five years during a study of the so-called indirect land use change. It could take effect only if three federal agencies agree and Congress could intervene to block a rule.

Corn-based ethanol and some feedstocks for cellulosic ethanol would have trouble under EPA’s current scoring of land-use change to meet targets for greenhouse gas savings.

Under ACES, are permits valid “forever” or for a fixed period (e.g., one year)? If they are for a fixed time frame, will 85% be given away each period (e.g., year), or does the 85/15% mix shift more to auctioned rather than given-away permits over time?

If you want a sneak preview of the fight over climate-change legislation in the Senate, look no further than the current battle over health care reform.

Compare: In July, the House released a relatively liberal health care bill, complete with a public option and mandates for individuals and employers. In June, the House passed a relatively liberal climate-change bill, complete with a cap-and-trade provision and a mandate that 15 percent of the nation’s electricity come from renewable sources like wind and solar by 2020.

One of the places most recently where you’ve been rather blunt is on the proposed Waxman-Markey climate bill. How would you summarize the problems that you see?

You can summarize the problem and prove that the bill is inadequate in a very simple way. You just look at the geophysical constraints on the problem and you look at how much carbon there is in oil, gas, and coal. And you see that the oil and gas is enough to get us into a dangerous zone for atmospheric carbon dioxide but not so far that we couldn’t solve the problem. But if you add coal and put that carbon in the atmosphere, then there is no practical way to solve the problem. So you just have to look at the proposed policy and see if it allows coal to continue to be used and emit the CO2 in the atmosphere.

You’ve got to cut off the coal source. Not only does [Waxman-Markey] assure that we will continue to run these coal plants that we have but it actually gives approval for additional coal plants. That simple test tells us that this bill is not adequate.

The basic point—the fundamental problem—is that because of government policies, fossil fuels are the cheapest form of energy. They are not made to pay for the damages they do to human health and the environment. As long as fossil fuels are the cheapest form of energy, they are going to be used. That’s why I say you have to address the fundamental problem and that is put a rising price on carbon emissions.

There is an alternative: moving the negotiations onto a different diplomatic track. Kyoto’s approach has not obviously paid off. Global carbon-dioxide emissions have grown by 25% since the protocol was adopted in 1997. That is partly because the treaty left out big emissions sources such as deforestation, but also because potential participants were put off by the idea of internationally binding commitments.”

Global warming activists endorsed by the preeminent climatologist James Hansen are working to defeat the climate and energy bill in Congress, and they’re using some provocative stunts to spread their message.

Laurie Williams and Allan Zabel are EPA attorneys who have taken up advocating against cap-and-trade on behalf of rebated carbon taxes, most recently in a Washington Post op-ed. They also posted a video to YouTube making many of the same arguments at somewhat greater length. Now the EPA has instructed them to take the video down by the close of business today, at pain of disciplinary action from EPA ethics officials, and to submit any future drafts to EPA officials before posting

Dear Readers: A critical choice is in progress. The U.S. House of Representatives narrowly passed a climate bill this past June, and a similar bill was introduced in the Senate in late September. Both bills rely on a Cap-and-Trade with Carbon Offsets approach. Based on our 20+ years each as public sector environmental attorneys, we believe enactment of this type of bill would lock in climate degradation; it would enrich carbon offset investors, but fail to create the shift in incentives needed to begin the clean energy revolution. We urge you to use the materials on this site, including our video, to learn about this issue and to contact your representatives. Ask them to become educated about the choice between Cap-and-Trade with Carbon Offsets as opposed to the approach we call “the Real Solution” – Carbon Fees with Rebates. Below is our May 2008 Open Letter to Congress. On the right, please find links to our 10-min YouTube Video, a Sample Letter to Congress and other resources. Your participation is crucial. Please contact us with any questions.